HomeInsurtechThe ultimate guide to InsurTech: Building a business strategy for the digital age

The ultimate guide to InsurTech: Building a business strategy for the digital age

Published by:
Published on:
December 13, 2020
Published in:

The ultimate guide to InsurTech: Building a business strategy for the digital age

The almost 300-year old industry has been relatively slow to react to tech developments. The insurance providers are not known for taking risks. They are the exact opposite. When it comes to innovation spending, some insurance firms are a little humble to invest money into projects that don’t have a predictable outcome.

Till recently, there was no urgent need to implement technologies or change anything in the well-established and smoothly operating machine. Yet with the proliferation of InsurTech firms that are invading the insurance space with revolutionary business models, cheaper services, niche customer products, the incumbents realized the risk of being disrupted. In the past, insurers have been protected by high operational barriers to entry. In the digital age, these high costs are considerably reduced. And the slow response left the door open to new entrants. The InsurTech movement did launch the process of digitalization that caused an inevitable industry metamorphosis. Today digitalization is a priority for around 73% of insurance CEOs who seek to lead the organization through a complete transformation. 

But first things first. What is InsurTech, and how it disrupts the sector? Why should it matter to you, anyway? We tried to answer all these questions in our comprehensive guide. Keep reading to learn more about digital potential, industry trends, and how to become a front-runner taking full advantage of all that digital can offer.

Introduction to InsurTech

Accenture found out that about 70% of consumers consider technology is ingrained in all aspects of their day-to-day lives, 19% of which view it as an extension of themselves.

Innovation through cutting-edge technologies is a primary driver of transformation in the insurance sector, and this has led to immense gains, even though these changes can initially be accompanied by uncertainty and doubt. In recent years, such innovation has happened on the back of new technological advancements, with the phenomenon often being entitled InsurTech.

So what is InsurTech?

InsurTech is a blend of words insurance and technology, inspired by the term fintech. It applies to a wide category of state-of-the-art technologies that are disrupting the insurance space, including smartphone apps, wearables, claim acceleration tools, online policy handling, and more. Essentially, any digital tool designed to optimize the processes of insurance firms or boost customer experience can be viewed as InsurTech.  

This term may also refer to digitally native agencies that entered the insurance sector and ensured coverage to tech-savvy consumers.



InsurTech came late to the game, mostly due to government regulation and historical switching costs that insurance providers have had to bear to keep abreast of technology. The ever-increasing size of the insurable market provided additional incentive for entrepreneurs to begin to create groundbreaking products for health insurance. Other sectors – Property & Casualty, Auto, Home & Commercial, Life & Annuity – began to follow suit. 

InsurTech’s emergence is inextricably linked to fintech and emerged around 2010 to address customer demand. First startups offered predominantly advances in sales and digitization of existing business models. A few of the early insurance tech players that introduced innovations were CoverHound, the price-comparison portal, Friendsurance, a peer-to-peer insurer, and Trov, an on-demand property insurer. In 2011, 45 investors made a total of $131 million in growth capital investments. Moving forward eight years to 2019, insurance global investment reached the $5.5 billion benchmark. The number of investors as well as firms calling themselves insurance tech startups has since exploded to supplement a vast, growing system of interconnected services.


InsurTech today: Market size, Landscape, Global growth

Today, InsurTech is a $5.5 billion sub-industry that stands to either disrupt or empower the insurance incumbents. As the recent reports and statistics show the global market size will keep growing. It is predicted to hit the point of $10.14 billion by 2025.

An increase in demand for digitalization in business processes, especially claims processing simplification and automation capabilities, is the key driving factor. Moreover, the continuous development of various payment processing technologies has made the transaction easier, contributing to market growth. Also, innovations and unique solutions created by insurance tech startups to renovate the value chain are attracting funds from legacy players and investors worldwide. 

Additionally, the FinTech industry recognized the necessity to integrate insurance-specific technologies into their systems. It translates into the potential collaboration between the two sectors, opening up more possibilities to the vendors, brokers, analysts, and policyholders.

What makes InsurTech revolutionary

Technology offers the efficiencies needed to provide the service consumers demand while enabling carriers to streamline their processes, tailor, and scale their product offerings. But InsurTech does not just mean delivering products online. Smart tech impacted every component of the value chain much more deeply. 

First, by an automated only approach, InsurTechs reduce costs, streamline operations to meet customer expectations, and offer more competitive prices. Because of the high-level automation of policy management, and other back-end processes, digital agencies can offer much cheaper premiums. Furthermore, as technology helps advance most of the business procedures, the insurance firm can concentrate on developing top-notch products. 

The ability to deliver personalized product offerings based on usage or value-added services is another characteristic that makes InsurTech disruptive. Data is the major asset for any business that can bring valuable insights into customer behavior. Insurance tech startups are applying advanced analytics tools powered by artificial intelligence & machine learning techniques to offer customized individual coverage. 

Third, InsurTechs cater to specific value pools in the sector rather than aim for providing end-to-end solutions. They cover underinsured consumers in the niche categories previously excluded by traditional insurers, like small businesses, pet owners, or disabled persons. 

The modifications that InsurTech brought to the sector are substantial. The industry is poised to be totally revamped, and it’s critical for traditional insurers not just to watch it happen but to take measures and respond to new requirements of the modern digital world.

New Business Models enabled by Technology

Experts predict that nearly 60% of existing insurance models will disappear within the decade. The fierce competition, new capabilities with technologies, and on top of that consumers’ changing preferences sum up to the call for more flexible and consumer-facing business models.

The first startups focused on the retail segment with concentrations in the property & casualty, offering predominantly advances in sales and digitization of existing business models. Over time, disruptive InsurTechs penetrated all spheres and business lines by leveraging next-generation technologies that enable modifying existing products (e.g., telematics insurance) and developing new ones (e.g., cyber insurance).

Number of Inovations

Despite this fact, it’s not all bad for traditional providers. Only 9% are seeking to replace incumbents. Meanwhile, a large portion of InsurTechs (63%) concentrate on improving insurers’ top-line, accelerating operations, and removing inefficiencies.

Round Chart

Today the InsurTech ecosystem involves hundreds of market participants that use the following digital models:  

  • Technology enablers are InsurTechs that contribute to existing players and address industry challenges. They enable incumbents to drive new digital experiences and deliver more value by redefining traditional underwriting procedures and pricing models, interpreting large sets of data to inform risk modeling, and enhance portfolio performance. There are various enabler types in regard to their relevance to the specific insurance business, the value they offer, and operating model: 
    • Front-office solution providers
    • Policy/plan management solution providers
    • Claims management software providers
    • Data specialists
    • Technology specialists 

Peer-to-peer (P2P) insurance is an emerging operating model to access insurance coverage at lower costs than most of the traditional providers. Friendsurance was the first-to-market P2P insurance community based on individuals supporting one another in the event of a loss. A few other companies such as Lemonade, InsPeer emerged before too long, allowing groups of policyholders, typically friends, to pool their premiums, thus reducing costs.

  • On-demand insurance allows purchasing insurance coverage usually when the asset requiring it is in use and at risk. According to the World Insurance Report, 37% of respondents would try on-demand insurance.  
    • Microinsurance offers coverage of smaller risks via rapid underwriting, including on-demand products like travel or event insurance, pay-as-you-go car insurance, etc. BIMA and Cuvva are some of the most popular microinsurance providers.
    • Sharing or Gig economy insurance refers to the rise of freelance opportunities such as Uber and Airbnb. InsurTech products allow these independent contractors to be covered by swiping right when they need to be covered.  
  • Comparison portals such as Check24 and PolicyGenius provide users with price and terms comparison information on various products from numerous companies.
  • Digital insurers underwrite policies and manage the process from beginning to end. For instance, Sherpa startup provides an end-to-end personal risk management platform with in-depth analysis of existing coverage and optimization of the insurance portfolio capabilities. 
  • Open Insurance, also known as API Insurance, is a trend gaining traction. It involves the move to a connected data ecosystem, powered by partnership APIs. Open business models allow external and cross-industry collaboration with a secure exchange of data, tasks, and business functions to future-proof businesses and generate fresh revenue streams. For example, Lemonade launched its public API, allowing anyone to distribute its policies through their websites or apps. This type of business model offers carriers one of the best routes to become an ecosystem business and capture new opportunities.

Insurance API

Industry disruption through ecosystems

Digital ecosystems are not a new phenomenon. Some insurers in the healthcare and finance sectors are already tapping into an ecosystem to embed their products into seamless consumer journeys. The rise of interconnected services is driven by the users’ ubiquitous use of smart technologies and the readjustment of global markets into a connected whole.

Insurance providers should give attention to InsurTechs since most of them are coming to collaborate. Startups often lack traditional insurance expertise, while incumbent insurers can benefit from alternative ways of harnessing technology and new insights on market segments. The complementary nature of digitally native firms and established companies is obvious.

Industry model

Ecosystems represent an interrelated group of services and products that allow users to fulfill a diverse range of needs in a single integrated experience. Such ecosystems consist of a network of players from within or outside the sector. They work together to build and deliver comprehensive consumer solutions and innovative experiences that are possible as a result of the partnership. There is no need to operate all elements, but each player complements the solution by delivering a critical component of it. 

The core values insurers can obtain from being an ecosystem player:

  1. Reducing friction for policyholders who want to switch between related services 
  2. Harnessing benefits of network effects 
  3. Providing improved and more personalized services to clients

Insurance platforms

Accenture’s research reveals that most insurance executives realize the tremendous potential of digital ecosystems. Operating within one can protect their businesses from disruption, enable creating tailor-made product offerings, and reduce customer churn. And as we have already mentioned, the API-based model is an effective way to become an ecosystem business.

Artificial Intelligence & Machine Learning

AI & ML remain the top InsurTech trend for the upcoming era. This tech has the potential to impact the way insurance businesses run, making almost every process more efficient: loss prevention, underwriting processing, claims settlement, fraud detection, product pricing, sales, and user experience. Meanwhile, the data collection and analysis opportunities AI provides will help insurers reach high-level automation and enhanced personalization. Chatbots are prominent examples of AI-powered back-end tech that serve as virtual assistants for the consumers, making their journey easy, engaging, and smooth.

Real-time IoT data changes everything

The Internet of Things (IoT), wearables, and telematics can transfer an enormous amount of real-time data that is directly actionable for underwriting, risk pricing, and mitigation. With IoT data, carriers can provide real-time advice for drivers, on-the-spot health advice, immediate accident assistance, and even trigger claim payments. 

Telematics & Usage-Based Insurance (UBI) are actively gaining popularity. UBI is an insurance policy that calculates the premium amount based on the driving behavior, the most often measured by a telematics device installed in the vehicle and a specifically designed mobile app. Consumers are generally willing to share data in exchange for personalized offers, better prices, and improved experiences.

Driving efficiency with Robotic Process Automation (RPA)

RPA is the most widely adopted tech trend to be used in 2020 and beyond. Aiming to automate workflows, this solution can accelerate the claim registration and processing time by striking 50%. This automation tech paved the way to digital innovation with legacy systems that up until now were blocking modernization.

Consumer experience becomes a competitive advantage

In an increasingly connected world, customers manage most of their lives online. They are accustomed to receiving online experiences tailored to them and expect that you know who they are, what they need, and when they need it. Consumers will set high standards for your service levels and will demand that you are easy to deal with.

Enhanced data management & security with Blockchain

Blockchain uses advanced cryptographic algorithms to create a secure register of information that prevents unauthorized access, modification, or removal of data. Due to the inherent security and immutability, the distributed ledger allows storing data securely, processing claims faster, reducing the risk of fraud to a minimum. Systems powered with blockchain add quality value and result in revenue growth, improved customer experience, ability to deliver new products, and promote IoT insurance products. The potential savings of applying a distributed ledger to manage data are astronomical.

Big data advanced analytics


95% of insurance executives expect an increase in the use of advanced analytics over the next three years. Data is the key to improved relationships between businesses and consumers. Today, it is not information about who uses the product, how, and where. Analysis of big data brings deep insights into user behavior and habits, allowing service providers to have efficient planning and reporting. Big data analytics enables carriers to make risk predictions, improve underwriting efficacy, unlock market macro trends. Plus it is a fuel for AI and RPA management.

The rise of No-code & low-code platforms

No-code and low-code software development platforms are changing the way enterprises create new digital products and applications. Outsystems, Mendix, Appian, Salesforce, and Microsoft all point to successful use cases in sophisticated business applications. Designed to address the unique compliance, risk, and security issues of financial firms, these platforms accelerate the creation of the front-end consumer experiences, helping insurance agencies to enter the fast-paced, customer-oriented era.


Industry-shaping software solutions

Either you want to enrich the existing product with an insurance feature, or you need to modernize your legacy software or launch a game-changing InsurTech product, you should understand: it isn’t about placing standard offerings online. When starting insurance software development, bear in mind that:

  • The current value system is oriented on the customer, where their satisfaction is the most vital KPI. 
  • The technology solution must be highly resilient to cyberattacks.

Here is a list of cutting-edge insurance software solutions that are vital for insurers if they want to survive and keep their business running in the digital world.

    • Quote & risk management
    • Customer portals administration
    • Claims, invoicing, and billing
    • Mobile applications
    • Chatbots Integration
    • Compliance management
    • Document & data management

ApexTech is highly engaged in the development of the InsurTech sector, supporting companies, communities, and startups with tech solutions, useful advice on strategy, and its practical usage to enhance service delivery, customer loyalty, and gain profit. Adoption of technology without an underlying strategy can create tremendous inefficiency to insurance processes, adding complexity, and creating more costly issues for enterprises in terms of time, personnel, and customer service. Follow us to discover our real cases implemented in the insurance segment. And find out how our team helps companies increase efficiency and lower costs. 

We know that digital transformation won’t happen overnight. As trivial as it sounds, patience, a deep understanding of the market, and your efforts backed by the right partner will help you win out and become a data-driven, digitally matured insurer.

Unique challenges that affect the InsurTech industry


As the insurance sector has evolved, so too have the challenges facing insurers, from keeping up with technological advances to managing changes in regulations. For many insurers, the changing landscape presents a whole new set of issues.

Changing customer expectations

Consumers have been well immersed in the digital world for years now and are accustomed to a highly refined online experience.

With increasingly demanding customers who want personalized communications and superior experiences, insurance firms have to adapt and take the plunge head-on into the modern world of technology. They expect convenience, on-demand information, and around the clock access to service to be able to submit claims and connect with their insurer on the move. The digital space is also expanding customers’ ability to discover and compare products and services – they will quickly switch if they see they can get better services for less. The common challenge is the escalating pace of change as developments that would have taken years to impact the market now become consumer expectations in a matter of months.

Customers growth

How to solve it? Now it’s not enough to have high-tech insurance apps for policy acquisition or mobile-first websites for claims settlement – carriers must stand out in other areas as well. They should look at add-on services like automatic applications and simplified claims settlement processes to provide better customer service, enhanced engagement, and lower costs. 

The ability to view a policyholder’s historical data will allow you to provide a ‘personal touch’ to each client. A CRM, for example, helps you track the entire customer journey, from initial interest and contact, into the sales process, through to customer success teams, follow-ups & marketing engagement.

Technological advancement

Turning the promise of new technology and big data into commercial success is one of the biggest challenges. This includes capitalizing on the opportunities in mobile and web-based services, using big data and predictive analytics effectively, and overcoming the problems associated with legacy technologies. 

According to a McKinsey survey, 9 out of 10 insurance firms say they are struggling to develop the technology infrastructure they need, blaming legacy software and the sheer magnitude of their IT systems. 

On top of that, internal processes are unnecessarily complicated. Most of the activities performed by the insurance workforce are redundant and repetitive.

Legacy Systems

Legacy tech and out-of-date organizational structures, combined with siloed departmental data, can leave a lot of insurers playing catch up. Searching on one platform for client information and processing the next steps on another.

Transitioning from paper trails to online isn’t always enough. Digitalization that implies a complete transformation of existing business models is also required. 

How to solve it? Taming legacy systems can be a challenge, but by stabilizing your core technology, you can significantly improve its performance and develop a platform for the future. 

Adoption of API or microservices architecture is a proven way to overcome the complex-legacy-system problem and enable new offerings. 

Many repetitive back-end tasks can be replaced entirely by data-driven software – like RPA and ML-powered tools – that automates processes and drives new gross profit to the bottom-line.

Cyber and data security

Technology comes with its share of risks and challenges, starting with efficient cybersecurity. Insurers deal with sensitive and financial data that makes them appealing targets.

The advances in technology result in an ever-increasing amount of collected and stored data, including personal information. Not only are there legal obligations to deal with this information appropriately, but it is also a matter of reputational risk. 51% of insurers believe cyber and data regulation is the top challenge in adjusting to digital disruption. 

How to solve it? When creating an InsurTech platform, your cybersecurity efforts must be strategic and proactive rather than reactive. Such tactics include the use of AI, advanced analytics, and blockchain to build a more predictive management model of cyber risk.


Insurers face unique challenges in their attempts to match the agility of other sectors due to a highly regulated environment. It requires significant maintenance investment to ensure compliance with frequently updated laws. On top of overall compliance costs, some regulations may also disincentivize investment in new tech. For instance, US regulators require auto insurers to file policy pricing to confirm that policies are non-discriminatory. This means that a usage-based pricing strategy is hard to adopt.

AML5 or 5AMLD allow, for example, that a user can become a customer in seconds via mobile phone anywhere if you meet a list of technical and legal requirements. It’s an underlying regulation that must be complied with by all those businesses in the insurance sector that want to digitize their customer acquisition processes.

The burden of compliance and complexity of regulations is growing rapidly along with rising costs associated with it. 

How to solve it? RegTech can be an answer to this question. Regulatory technology, in short RegTech, is another example of an industry that is being changed rapidly by software. It’s an emerging area that uses modern technology to help businesses overcome regulatory challenges efficiently and less expensively. Regtech services providers can also improve your data management capabilities, provide your company with increased automation and data-driven insights in areas such as reporting, regulatory compliance, and financial risk management.

Talent acquisition

Sourcing talent with the skills you need to meet the pace of change may become difficult. This is particularly true when it comes to filling technical roles. 

Young people are showing little desire to venture into insurance over other, more exciting industries, such as finance, consulting, or tech spaces. In the US, only 2% of university graduates plan to work in insurance. Insurers lack the skilled staff required to develop new insurance innovations.

How to solve it? Carriers might provide added value. Developing a strong employee experience and being able to count on an impeccable reputation in the industry will be imperative. InsurTech partnerships could enable incumbents to position themselves as dynamic and potentially disruptive. These elements are magnets for attracting quality candidates who will contribute to the success of the company. 

Competing in the digital age


With the increasing speed and complexity of change in the industry, incumbents must update the management models. It’s time to reinterpret what change means for insurers and embrace agile methods.

Agility is crucial in keeping pace with digital. But experience demonstrates that it isn’t possible to quickly re-engineer a high-cost sophisticated business into a low-cost agile one. And it’s too expensive. However, funding enterprise insurance projects with money saved by the implementation of automation within the organization is a perfect middle-ground to this problem. Automation methods like RPA and ML not only make insurance companies more efficient but allow them to finance and experiment with innovation projects.

While insurers essentially have to scan the horizon for next-generation technology, innovation doesn’t have to be disruptive to be effective. The reality is that so much can be gained from small improvements. Incremental changes, such as replacing a percentage of your on-site risk audits with remote audits, can yield drastic results. What is more, breaking down organizational and technological silos will help you identify different value chains and have coherent orientations for each, based on a vision and strategic objectives.

Whether disruptive or incremental, innovation must be a part of the culture before it can bring success. Market realities require ongoing evaluation and adjustment as needed based on an iterative approach. This experimentation, learning, and continuous improvement must be present at all levels, from senior management to all employees.

Incumbents have time to adjust to the changing risk environment, shifts in customer attitudes, and accelerating advances in technology, but there is no room for complacency.

The Future of InsurTech

Future of InsurTech

Accenture conducted a study in which they have analyzed nearly 20 industries and found out that the insurance sector is among those most prone to future disruption. It says that providers who ignore digitalization or are slow to respond to digitally native competitors could be left far behind, losing market share near to $200 billion and losing the opportunities to follow new growth activities.

The digital insurer of the future will be super-aware of consumer habits and demands, propose highly personalized products and services when the user needs it. Data-enabled operations will minimize friction and streamline the whole customer journey, starting from requests for insurance coverage to claim. Artificial intelligence will be used to interact and build an understanding of the customer, and servicing will be through digital personal assistance, 24/7.

The predictions for the future of the industry are impressive, and it’s high time to use the advantages of the technologies to bring services to the next level.

Final word

The insurance sector has not yet worked out a consistent approach to disruption. Now is the time for executives to think forward, put innovation at the heart of their strategies, and define to what extent they want to participate in the InsurTech ecosystem. To compete, insurers need to harness digital capabilities in months not years, which in turn demands new ways of thinking about business strategy and project delivery.

In a view of changing trends, incumbents must prepare to embrace the revolution and start seriously addressing the disruption caused by the rise of insurance tech startups. In particular, the much higher level of customer engagement that they are attaining. 

InsurTech can be the facilitator, and if incorporated into core strategies, it might bring gains in many operational areas, leading to cost improvements and greater revenue generation. If you focus sharply on the customer demands and select the right set of ecosystem partners to satisfy these demands, you will benefit from the unique combination of capabilities, data, customers, and industry knowledge that will drive the business’s innovation. 

ApexTech is a team of professionals who help companies with the implementation of insurance industry software solutions that are vital for keeping their business running in the epoch of technology. Get more detailed information on strategy and product development from our experts who will assist you in unlocking the enormous capabilities of all that digital offer.

About the author

Emma Clark


Emma Clark is passionate about exploring diverse technologies applied across the E-commerce, insurance & financial services industries. Expert in the development of transformation strategies, she eagers to help businesses reach new heights.